STATE EXPANDS MORTGAGE PROGRAM

Those borrowing from Fannie, Freddie can now participate

If you’re a struggling homeowner in California with a mortgage owned by either Fannie Mae or Freddie Mac, then you may have a shot at a home-loan reduction through a $2 billion state program.

Officials with Keep Your Home California, which gives out mortgage aid, announced a key change earlier this week in its principal-reduction program that now allows both Freddie and Fannie to participate.

Starting in June, mortgage servicers will no longer be required to match program money dollar-for-dollar in order for a principal reduction to happen. However, servicers would have to agree to either a term or rate cut, or both. The state housing agency made the change to encourage more participation in a program that has gained little traction in the past year.

“In response to this week’s announcement by the California HFA (Housing Finance Agency,) the Enterprises will work with the HFA to apply its new program to Enterprise loans,” according to a statement from the Federal Housing Finance Agency, which regulates Fannie and Freddie.

What’s important to note: Freddie and Fannie would not be paying off any loan balances in the Keep Your Home California program. With the matching requirement gone, the program itself would pay for 100 percent of the mortgage reductions.

Still, their participation in the state program could have a big impact, considering Fannie Mae and Freddie Mac own more than 60 percent of mortgages in the state.

Fannie Mae and Freddie Mac made it clear to servicers in December that they could take part in mortgage-aid programs paid for by the Hardest Hit Fund, or the bailout, as long as they fit these criteria:

• The modification assistance program does not require the servicer or Freddie Mac to make a financial contribution or match any assistance provided by the HFA.

• Program participation and parameters for receiving assistance do not conflict with Freddie Mac’s modification requirements under the guide or the servicer’s other purchase documents, as applicable.

• Receipt of funds does not impair the first lien priority of the mortgage.

• Funds are remitted to the servicer from the HFA in a one-time lump sum payment.

U.S. housing finance Director Edward DeMarco, who regulates Fannie and Freddie, has been feeling the heat from California and federal leaders over the agency’s unwillingness to cut mortgage balances of borrowers with loans owned or backed by Freddie or Fannie.

He has long said that mortgage write downs are not in the best interest of taxpayers and that the agency has determined other tools, such as the Home Affordable Modification Program, or HAMP, are already doing the job of helping at-risk homeowners avert foreclosure.